UK IT budgets have been hit unevenly by the downturn, where 38% of organisations expect to spend more on IT this year, while 32% are facing cutbacks.

CIOs in the public sector and charities which rely on government funding and donations from the public are facing the most severe cutbacks in their spending. They are looking to use IT in innovative ways to help their organisations reduce their overheads.

West Midlands Police, which faces phased budget cuts of £126m, is looking to shared IT services and partnerships with suppliers to help run its IT services more efficiently.

“We are looking at key opportunities where ICT can add return on investment and deliver a value proposition to the organisation," says CIO Chris Price.

Children’s charity St Christopher’s has delayed some IT projects, following a cut in its income from local authorities. IT manager Dave Glanville, is concentrating on projects that will bring a quick return, such as server virtualisation.

St Christopher's has become more agile and is focusing on shorter-term projects. “The effect on IT is that we also have to be quick and agile,” he said.

Other organisations are stepping up their spending on technology as they look for ways to boost their turnover during difficult trading conditions.

High street retailer John Lewis, which posted record sales in January, is investing in a state-of-the-art EPOS system, an updated website, and has longer-term plans for data analytics.

“We are increasing our investment in technology and we are recruiting 50 new IT partners,” CIO Paul Coby told Computer Weekly.

Channel 4 is another organisation that is stepping up its IT spending, as it gears up for the paralympics and the launch of the YouView set top box.

Kevin Gallagher, CIO, says that investing in IT will give CH4 a competitive advantage in 2012. “We have an opportunity to get good value because other people will not be investing,” he says.

Server virtualisation has been a priority for businesses for the past few years, driven partly by datacentre consolidation.

It offers a way for businesses to cut their infrastructure costs and gain a rapid return on investment.

Nearly 60% of the UK organisations surveyed by Computer Weekly and TechTarget are planning server virtualisation projects this year.

Glanville of St Christopher’s says virtualisation will pay for itself rapidly by reducing energy costs, and will also make software testing easier.

“We want to be able to test stuff in a much more flexible test environment, which virtualisation will give us,” he says.

Virtualisation is key to helping supermarket Sainsbury’s meet its plans to double in size by 2020, without doubling its IT footprint, according to the supermarket's IT director, Rob Fraser.

“With so much we want to do over the next five years, it makes sense to invest in a large virtualisation system. That gives headroom for all sorts of things we haven't even thought about yet," he says.

Cloud computing has yet to take off in the way it was expected to. Nevertheless, some 16% of IT professionals plan to invest in private cloud this year.

And 12% are planning to integrate external cloud with their internal systems, according to our research.

For cash-strapped businesses, cloud computing, particularly software-as-a-service (SaaS), is the best strategy to reduce IT costs, according to Richard Hall, an expert in company restructuring.

“Most enterprises are looking at a mixture of infrastructure-as-a-service [IaaS], blended with the existing IT, as a hybrid. But ideally, we are looking to large shifts to SaaS,” he says.

Creese at Hampshire County Council also sees cloud computing as key to keeping IT costs down, and has consolidated much of the local authority's estate already.

For others, cloud is a lower priority. West Midlands Police, for example, has a large number of legacy IT systems that would be impractical to transfer to the cloud.

“When you move from quite a heavy investment in legacy systems, you don’t change it all over night,” says Price.

Fraser also intends to keep Sainsbury’s IT out of the cloud. “The cloud is very present in the news at the moment. We do take some things as services, but when we take them we often buy the complete service,” he says.

Taken overall, businesses are spending on IT again, though they are still cautious and are focusing on projects that will bring a quick return.

“It’s a case of you can’t run an eight-year-old operating system for ever and a day. You have to make an investment,” says Ovum's Illsley. “There is a bit of a sense we have cut too much – now we have to get it back.”

For some organisations, such as Channel 4 and John Lewis, investing in IT is a way to help grow the business when new revenue is hard to come by.

Data analytics, in particular, can help businesses build better links with their existing customers, and help them understand what their customers are looking for.

The economic climate in Europe continues to look challenging, with much uncertainty in the Eurozone.

But the prospects for IT look encouraging, with most organisations viewing technology as a potential solution to tough trading conditions, rather than an area for wholesale cost-cutting.

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